When a customer ignores the payment terms you agreed

Long payment terms are legal in New Zealand when both sides agreed them; no law sets a maximum between businesses. Once a due date is agreed, a customer paying on “our own cycle” is paying late. What you do about it depends on whether this is a relationship you want to keep.

It happens across every size of business. You agree the 20th of the following month, or 7 days, or the payment terms in a standard form contract. Then the customer tells you how they pay their bills: this is our cycle, this is our payments process. Often it is a good client, one you value, and they are taking longer and longer to pay. You don’t want to rock the boat. In the meantime, you are stretched.

Are 60 and 90-day payment terms legal in New Zealand?

Yes, if they were agreed. No New Zealand law caps payment terms between businesses. The Business Payment Practices Act 2023 would only have required large businesses to report how quickly they paid, with no cap, and it was repealed from 8 March 2024, before it ever took effect. When it was repealed, the Minister described large businesses imposing long payment terms on smaller ones as a major problem.

Government holds itself to a different standard. Under the Government Procurement Rules, central government agencies must pay their suppliers within 10 business days, and must require those suppliers to pay their subcontractors on terms no less favourable. Councils are encouraged to follow the Rules, not required to.

In construction, the parties can agree a long fixed payment date. What a construction contract cannot do is make your payment wait on someone further up the chain being paid. More on that in “I can’t pay until I’ve been paid”.

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Does “we pay on our cycle” change what you agreed?

On its own, no. A contract changes by agreement. If your terms went with the quote and the customer accepted the quote, those terms, including the due date, are likely part of the deal. A payment policy announced afterwards sits in the same position as terms printed on an invoice after the job: too late to bind you.

Two things can blur that. If their purchase order, with its own payment terms, arrived before you started and you went ahead without raising it, their terms may be the ones you accepted. And months of quietly accepting their cycle might be read as agreement to it; the law on that is unsettled. So when the cycle you are being paid on is different from the one you agreed, say so, in writing, even if you carry on working. Paying after the agreed date is paying late, and your terms on interest and collection costs apply to it.

Inside a relationship you want to keep

Most businesses will never take a good client through a formal process, and they shouldn’t have to. There is a lot you can do first, and very little of it rocks the boat. We cover the conversation itself in when a good client pays slowly. With big customers, three things make the most difference.

Get into their payment run

Big organisations pay through a process, and invoices stall in it. The commonest reason is a missing or wrong purchase order number. Then come invoice lines that don’t match the order, an order that has been closed, or nobody on site entering that the goods or work were received. Often the hold-up is the project manager, not the accounts team. Find out their payment run dates and cut-offs, what an invoice needs to pass their checks, and who approves it. Fix their process first. If that doesn’t move it, take it to procurement or the commercial manager, who own the relationship.

Know what the waiting costs you

Every extra day you wait is money you are lending. You can work it out: the invoice value, times what money costs your business a year, times the extra days, divided by 365. At a 12% cost of money, $50,000 paid 40 days late costs about $658, and every extra 30 days costs about 1% of the price. Once you know the number, it belongs in your pricing, and in the conversation about the next job.

Make the process normal from day one

On construction work, make every claim a proper payment claim under the Construction Contracts Act from the first one. It is ordinary paperwork when it starts on day one, and the rights it carries are already in place if you ever need them. Raised for the first time in the middle of a dispute, the same paperwork can feel like a hostile act.

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When it tips

There is a point where a good client paying slowly becomes a customer taking advantage. The payments keep stretching, the promises don’t hold, and the experience has turned. If you are at the point of being prepared to step back from the relationship, the formal routes become worth knowing well. They are real, they work, and they are a big undertaking. Go in with your eyes open.

If you are ready to step back

• Construction work: the payment claim route. If the customer doesn’t answer a proper payment claim with a payment schedule in time, the full amount becomes a debt you can recover in court, with your actual and reasonable recovery costs. After a notice under the Act and 5 working days unpaid, you can also suspend work.
• Adjudication. For a construction dispute about money. The other side has 5 working days to respond, and the adjudicator then has 20 working days to decide, sometimes 30. Each side pays its own costs, and the decision binds while any court challenge runs.
• The Disputes Tribunal. For claims up to $60,000, with a filing fee of $62 to $496 depending on the amount, and no lawyers in the room.
• A statutory demand. Against a company that owes $1,000 or more and doesn’t dispute it. They have 15 working days to pay. It is a serious step towards liquidation, so it suits an undisputed debt and a relationship that is already over.

Where the agency comes back

The hardest part of this is the feeling that there is no accountability: that whatever you agree, the customer will pay when they choose, and there is nothing you can do about it. That is a real loss of agency for a business, and it is everywhere. Our small and medium businesses are some of the biggest free lenders there are.

The agency comes back from two places. The first is knowing where you actually stand: what was agreed, what the law says, and what it costs you to wait. The second is earlier than most people look. About 80% of what decides how quickly you get paid happens before you send an invoice or a claim: who you take the work from, what you negotiate into the contract, and how you set the job up to be paid. We cover that side in signing their contract. You’re allowed to protect yourself. You’re allowed to have your own terms, and to say no.

What you can do this month

• Write down what was agreed with each of your biggest customers, and how they actually pay.
• Work out your number: what the extra days cost you across those customers.
• Get your invoices into their payment run: the right PO, matching lines, receipted on site, before the cut-off.
• Raise the gap in writing, calmly, every time the cycle differs from the agreed date.
• Agree something better on the next job: shorter terms, staged or weekly payment, payment for materials, or a price that carries the time.
• Decide your line before you need it: the point at which you step back.

This page is education and commercial insight from our own research and experience, not legal advice. Do your own research, and get legal advice for your own situation.